Insider Trading in Indian Stock Market

Ups and Down in Indian Stock Market

One common method of rigging the market is insider trading. Here selected brokers take decision on which stocks to trade based on information passed on to them by people inside companies often company management themselves such information is not yet available to the public at large or other brokers. Circular trading by which a group of brokers colludes to ring the price of the share up or down is another common practice. For example: a broker can commit to sell shares of a certain company to a designated buyer 5days later at say Rs.100 per share. The deal having been struck, the broker colludes with other friendly to friendly brokers to trade in that scrip over the next 4days, each broker sell the scrip to another at successively lower prices. This process can be earned on with the shares going around circles till the price has been beaten down to the target price to Rs.80 on the 5th day the broker can pick up the lakh of shares at Rs.80 each from the market and sell them earlier committed buyer at Rs.100 each. He does make a neat killing of Rs.20 lakh on the entire deal minus some relatively minor cost incurred in the process of circular trading. The SENSEX eventually recorded from the volatility on Oct 10 2006 closed on 12926.18 points.